Growth funds: Going steady

At Value Research, the 'growth' category constitutes flexi-cap, large & mid-cap, value-oriented and multi-cap funds. These funds are designed to be the 'backbone of your equity portfolio', making them ideal for long-term wealth creation. When you invest in growth funds, you're gaining access to India's top 500 companies. About 64 per cent of these funds' portfolios are invested in large-cap stocks, while 18 per cent is in mid caps and a smaller portion lies in small caps. Growth funds typically invest in a mix of 'growth' stocks (companies with strong growth potential) and 'value' stocks (companies trading at attractive valuations), regardless of their category. Each investing style performs differently over time. Notably, value investing, which had fallen out of favour between 2018 and 2020, has continued its impressive run this year, despite the rise of smart-beta factors. Highlights & trends Performance: Growth funds have largely outperformed the BSE 500, led by multi-cap funds, which beat the index by 6.77 per cent, driven by a robust rally in mid- and small-cap stocks. They were followed by large & mid-cap and value funds. While flexi-cap funds also outpaced the index, they posted a more modest alpha of 3.31 per cent. Sectoral shifts: Owing to a prolonged slump in the Financial Services sector, growth funds have downsized their exposure. On the other hand, holdings in the Energy and Services sectors have seen a steady rise this year. A significant portion of growth funds remains in large caps, and they continue to tilt towards this segment. Increase in inflows: In recent times, growth funds have attracted significant inflows. Since September 2023, multi-cap funds drew inflows of nearly Rs 40,000 crore, of which Rs 7,000 crore came from six NFOs alone. And in September this year, inflows into large & mid-cap funds also gained traction, comprisi